Feb. 10, 2014

Chamber of Commerce President and CEO David May suggests to his readers that he is conflicted about proposals to raise the minimum wage (Fort Collins Coloradoan, Feb. 1). On the one hand, “it just feels right”; on the other, he suggests that doing so would force business to reduce their workforce, throwing people out of work.

There’s good news for David May: He need not feel conflicted. Many, many studies have consistently shown that relatively small increases in the minimum wage do not result in the loss of employment. In fact, according to economist Jeanette Wicks-Lim, the federal minimum wage could increase by as much as 70 percent — from $7.25 to $12.30 per hour — before causing a risk of significant job losses (http://dollarsand sense.org/archives/2012/0712wicks-lim. html).

Why is this? Because labor costs associated with most services provided by people earning the minimum wage (e.g. restaurant meals) represent a relatively small fraction of the total cost of the service. So increasing the minimum wage by 70 percent would result in price increases of just a few percentage points, which could easily be passed on to consumers. And more money in the pockets of people currently earning the minimum wage would mostly be spent rather than saved, resulting in expanded economic activity and more employment.

Raising the minimum wage would be both humane and rational. What’s not to like about that?